Gartner: Worldwide Semiconductor Capital Equipment Spending to be Flat in 2007, with $56.6B

STAMFORD, Conn., December 20, 2006 Worldwide semiconductor capital equipment spending grew 24.9 percent in 2006, but the market will readjust with revenue declining 0.7 percent in 2007, according to Gartner, Inc. The market is projected to return to strong growth in 2008, as worldwide spending will increase 20.8 percent.

“In 2006, slowing logic-related demand from integrated device manufacturers (IDMs) and foundries alike was offset by strong commodity memory investments, resulting in healthy growth for the semiconductor capital equipment industry,” said Klaus Rinnen, managing vice president for Gartner's semiconductor manufacturing and design research group. “In 2007, a softer macroeconomic sales environment for electronics combined with excess semiconductor inventories and strong 2006 capacity investments will cause a small contraction in equipment demand in 2007, but it will not be a collapse in demand.”

Gartner forecasts wafer fab equipment to turn in a nearly flat year in 2007 with 0.6 percent growth, down from 26.3 percent growth in 2006 (see Table 1). Gartner is projecting a market contraction for packaging and assembly equipment (PAE) of 5.7 percent in 2007, and a contraction of 5 percent for automated test equipment (ATE).

Table 1: Worldwide Semiconductor Capital and Equipment Spending Forecasts (Millions of Dollars)

 

2005

2006

2007

2008

2009

2010

2011

Semiconductor Capital Spending

47,197.1

56,062.2

56,619.4

65,730.7

60,276.1

58,699.7

68,320.2

Growth (%)

-2.7

18.8

1.0

16.1

-8.3

-2.6

16.4

Capital Equipment

33,936.5

42,378.0

42,070.3

50,800.5

44,287.5

45,492.2

52,909.4

Growth (%)

-10.5

24.9

-0.7

20.8

-12.8

2.7

16.3

     Wafer Fab Equipment

25,967.1

32,798.6

33,003.8

39,089.4

34,663.5

34,942.8

41,369.7

     Growth (%)

-8.4

26.3

0.6

18.4

-11.3

0.8

18.4

     Packaging and Assembly Equipment

4,196.5

4,833.7

4,559.0

5,736.1

4,833.4

5,102.0

5,788.8

     Growth (%)

-12.3

15.2

-5.7

25.8

-15.7

5.6

13.5

     Automated Test Equipment

3,772.9

4,745.7

4,507.5

5,975.0

4,790.6

5,447.4

5,750.9

     Growth (%)

-21.2

25.8

-5.0

32.6

-19.8

13.7

5.6

Other Spending

13,260.6

13,684.3

14,549.2

14,930.1

15,988.7

13,207.4

15,410.7

Growth (%)

25.6

3.2

6.3

2.6

7.1

-17.4

16.7

Source: Gartner Dataquest (December 2006)

The wafer fab equipment market continued to sail along, thanks to strong spending in memory, although first signs of the slowdown hit in the fourth quarter as push-outs by several key memory manufacturers occurred. At this time, these push-outs appear to be only temporary as the market supply and demand adjusts. Segments associated with leading-edge technology should be hot because equipment to facilitate 65- and 45-nm technology will be in demand.

The order picture for packaging PAE certainly peaked around the middle of 2006 as semiconductor assembly and test services (SATS) providers took a more cautious look at market conditions. This wait-and-see attitude is the dominant market view as 2006 comes to a close. Gartner analysts believe that end-user device demand will soften as we enter 2007. An expected softening of demand has pushed the PAE quarterly growth picture to the negative side. After a soft decline in 2007, we expect vibrant PAE market growth of 26 percent in 2008.

Like the PAE portion of the back-end manufacturing supply chain, the ATE segment experienced a healthy growth surge during the first half of this year. However, that growth has now stagnated as the year comes to a close. Despite a solid first half of 2006, there has recently been a weakening in orders. Growth indicators from test services providers suggest widespread weakness for the fourth quarter of 2006. The market has not severely eroded, but ATE sales are expected to be down in 2007.

“The driver of investments in 2007 is a combination of a revival of logic-related capacity investment as the year progresses and continued strength in commodity memory,” Mr. Rinnen said. “In fact, our current statistics show that memory spending could potentially reach a new high, accounting for 50 percent of total capital spending. And therein lays the biggest risk and volatility for 2007.”

Additional information is available in the Gartner report “Semiconductor Capital Equipment Catches its Breath in 2007." The report is available on Gartner’s Web site at http://www.gartner.com/DisplayDocument?ref=g_search&id=499612&subref=simplesearch.

This research is produced by Gartner Dataquest's Semiconductors Manufacturing and Design program. This research program, which is part of the overall semiconductor research group, provides a comprehensive view of the entire semiconductor industry, from manufacturing and design to device and application market trends. More information on Gartner's semiconductor research can be found in the Gartner Semiconductor Focus Area at http://www.gartner.com/it/products/research/asset_129175_2395.jsp

Contact:

Tom McCall
Gartner
+1 408 468 8312
tom.mccall@gartner.com


About Gartner:
Gartner, Inc. (NYSE: IT) delivers the technology-related insight necessary for its clients to make the right decisions, every day. Gartner serves 10,000 organizations, including chief information officers and other senior IT executives in corporations and government agencies, as well as technology companies and the investment community. The Company consists of Gartner Research, Gartner Executive Programs, Gartner Consulting and Gartner Events. Founded in 1979, Gartner is headquartered in Stamford, Connecticut, U.S.A., and has 3,700 associates, including 1,200 research analysts and consultants in 75 countries worldwide. For more information, visit www.gartner.com.

 

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